Commissioners of Jefferson County, which began the biggest U.S. municipal-bankruptcy proceeding in November, agreed to hire a manager for its $4.2 billion debt at a meeting in Birmingham, Alabama.
The capital structure and investments director will work with the commission, an investment committee and the county attorney to organize debt accounts for the court, commission members said at the meeting today. The job will provide annual compensation of $130,000.
“We have to restructure our finance department,” County Manager Tony Petelos said by telephone, citing the fiscal situation confronting the most-populous county in the state. The commission voted 4-0 to approve the new position.
Among its long-term debts, $3.1 billion is in defaulted bonds tied to sewers. The county sought bankruptcy protection Nov. 9 after failing to put in place a tentative agreement that called for a $1 billion cut in the amount owed, as well as rate increases and legislative action. Borrowing to overhaul the waste-disposal system led to the insolvency.
Hiring a capital director will help restore the county’s finance department, Petelos said. It has no chief financial officer, finance director or chief accountant, he said, although it has interviewed candidates for some of those jobs.
Control of Revenue
Officials from Jefferson County and Bank of New York Mellon Corp., the trustee for bondholders, have been in talks about how much of the sewer system’s revenue must be turned over to investors. The plant doesn’t generate enough money to cover warrants on sewer debt, according to court records.
The county’s slide to bankruptcy began in 1996, when it was forced to rebuild the sewer system after pollution was found spewing into rivers. Risky derivative financing tainted by political corruption backfired beginning in 2008, and the county became one of the biggest victims of the credit crisis.
In November 2009, JPMorgan Chase & Co. agreed to a $722 million settlement with the Securities and Exchange Commission over payments the agency said bankers made to people tied to county politicians to win business.